Japan Press Weekly

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2010 June 30 - July 6 [FINANCE]

Consumption tax rate at 10 percent! - Akahata editorial (excerpts)

Neither Prime Minister Kan Naoto’s kick-off speech nor the DPJ leaflet mentions corporate tax cuts.

Public anger is mounting at a possible consumption tax rate hike to 10 percent, which can be used to make up for a loss in tax revenues created by planned tax cuts to large corporations with clear benefits to financial circles. It is the height of dishonesty for the DPJ to obscure and evade such a serious election issue.

When the consumption tax rate was increased to five percent in 1997 from the initial three percent, people had to shoulder a burden of five trillion yen from the increase in the consumption tax, and four trillion yen from increased medical costs. Though household income was increasing at the time, the consumption tax increase caused the economy to sink to the bottom, leading to a major recession. This time, an increased consumption tax burden of 11 trillion yen would hit people when their household income is in decline.

National revenues from income and corporate taxes, which stood at 52 trillion yen in FY 1996, fell to 47 trillion yen in FY 1999 due to the recession-caused decrease in revenues from the two taxes. Tax revenues since then have never surpassed the revenues in FY 1996. The 1997 consumption tax rate increase showed that decreased household income further slows down the economy, reduces overall tax revenues, and further enlarges fiscal deficits.

The new growth strategy which the Kan cabinet has adopted states that corporate taxes including local tax shall be lowered in a phased approach to the level of other major industrialized countries. If this is applied to the figure before the sharp economic decline, corporate tax cuts will amount to nine trillion yen.

Large corporations, however, have amassed 229 trillion yen in internal reserves. To give further tax breaks to these large corporations would only help them to accumulate the money at the public expense.

The DPJ Manifesto Q&A manual for the House of Councilors election states that the DPJ is to draw up a bill to increase the consumption tax within FY 2010, and that the bill should be submitted as soon as possible for enactment. It suggests that the consumption tax increase must take place within a few years and that the bill for it should be passed through the next year’s ordinary Diet session.

The ongoing House of Councilors election is when the public should decide whether to allow a consumption tax rate increase to 10 percent and a further decrease in the corporate tax rate.
- Akahata, July 1, 2010